U.S. Music Industry Hits Highest Revenue Mark in a Decade, Fueled by Paid Subscriptions

Various streaming formats grew 43 percent to $5.66 billion in 2017.

For the second year in a row, the U.S. music industry produced double-digit growth, with total consumer spending on music growing to $8.72 billion, a 16.5 percent increase from the prior year of 2016, when those revenue reached almost $7.5 billion. That year, U.S. music revenue had grown 11.5 percent from 2015’s $6.71 billion, according to the RIAA.

You would have to go back to 1994, during the music industry’s heyday, to get the previous best year-on-year growth, percentage-wise, when revenue almost hit $12.1 billion in the U.S., up from $10.05 billion in 1993, which equaled 20.1 percent growth. In terms of the revenue seesaw that the U.S. has experienced, the industry is now back at 2008 levels, when revenue totaled $8.78 billion; back then, revenues were on the downswing from the industry's 1999 peak of $14.58 billion. Prior to 2008, the last time the U.S. recorded-music business had been at this level was when it was on the upswing, in 1992, when revenue totaled about $9 million.

Within 2017's $8.72 billion total, streaming overall remains the dominant growth vehicle, with the various formats growing a whopping 43 percent to $5.66 billion, up from 2016’s total of $3.96 billion. Looking at it another way, streaming last year generated 65 percent of revenue, or nearly two-thirds of all recorded-music revenue for the year.

Breaking out streaming further, paid subscription revenue totaled nearly $4.1 billion — more than overall streaming in 2016 combined — while on-demand ad-supported streaming from the likes of YouTube and Spotify’s free tier grew to nearly $659 million, a 34.6 percent increase. SoundExchange distributions — i.e. programmed streaming royalties from web radio — fell to $652 million from $884 million, due to Pandora cutting direct deals with labels and paying the label portion directly to those companies. Most of those Pandora payments can be found in the other ad-supported streaming category (comprising limited-tier services like Pandora Plus and Amazon Prime) which totaled $261.8 million, up from $81.3 million in the prior year.

Downloads continued to suffer the biggest declines, falling 24.7 percent to $1.33 billion, down from the $1.77 billion the channel had generated in 2016. Within that, download track sales suffered the heaviest decline, falling about 25.5 percent on both number of units (553.5 million copies in 2017, down from 2016's 743 million copies) and revenue ($650.8 million in 2017, down from about $873 million the year prior).

Digital download sales of albums fell to 66.4 million units in 2017 from 85.1 million units in 2016, which meant its revenue fell accordingly, reaching just $623.7 million, as opposed to $818.8 million in 2016. Percentage-wise, that represents a 22 percent drop in units and a 23.8 percent decline in revenue. Overall, downloads accounted for 15.3 percent of revenue — which means that, combined with streaming dollars, overall digital revenue now stands at nearly $7 billion, or 80.5 percent of total revenue for 2017.

Meanwhile, the decline in physical album sales slowed year over year, down 3.7 percent in revenue to just below $1.5 billion from the prior year’s total of $1.55 billion. CD sales dropped by 10 million units, to 87.6 million in 2017, while the LP gained less than 1 million units, up to 15.6 million copies, according to the RIAA. Overall, physical accounted for 17.1 percent of revenue in 2017, a higher share than digital sales.

Looking at suggested retail prices, the CD has increased to an average price of $12.08 per copy from the prior year’s $11.59 per copy, while the price of vinyl LPs has also increased, to $24.97 a copy in 2017 from $24.06 for 2016. Moving over to downloads, the average retail track price has increased one penny to $1.18, while the average price of a download album fell to $9.39 in 2017, from $9.62 in 2016.

The remaining 2.4 percentage points of revenue comes from synchronization, which totaled $232.1 million. That represents an increase of 13.5 percent from the $204.4 million generated in the prior year.

With U.S. music revenues soaring, RIAA CEO Cary Sherman noted, “This remarkable re-invention didn’t happen by accident. It is the result of years of painstaking work by record labels who continue to strengthen the teams and systems necessary to support an artist’s ambition, all while working closely with hundreds of digital platforms to bring music to fans in new and innovative ways."

The exec added that music labels around the world had spent an estimated $4.5 billion a year in discovering and developing new artists.

“The internet offers countless opportunities to distribute music, but with millions of songs and tens of thousands of albums released annually, it’s increasingly difficult for artists to break through and be discovered by fans,” Sherman said. “Record labels help artists stand out and elevate the music to the next level, whether it’s an established act or an up-and-coming new artist.”